China's largest portal website Sina Corp Monday announced that it would acquire outdoor digital advertising business from Focus Media in a deal that may be worth over US$1.3 billion, allowing it to become one of China's biggest advertising conglomerates.

Sina will acquire Focus Media's business in office buildings, elevators and supermarkets, which contributed 52 percent of Focus Media's total revenue and 72 percent of its profits in the first nine months of this year.

The company will issue 47 million new shares to Focus Media to fund the deal, which, calculated by its closing price of US$29.24 on Dec 19, would be worth US$1.37 billion.

The deal, having been approved by both boards of directors, is expected to be completed by the first half of 2009.

Different from its major rivals such as Sohu.com and Tencent, Sina relies heavily on online advertising, which accounted for 73 percent of its total revenue in the last quarter.

The acquisition enables Sina to expand its business beyond the Internet, giving it a better position to fend off the current global financial crisis and a slowdown in advertisement spending after the Beijing Olympic Games, analysts said.

Focus Media is China's largest publicly traded advertising company, running an advertising network in locations such as elevators, office buildings, supermarkets and cinemas.

The company planned earlier this year to list its mobile advertising business Focus Wireless and online advertising arm Allyes, respectively.

But a CCTV (China Central Television) report in March that accused Focus Media of illegally sending junk short messages, as well as the unfolding financial crisis, foiled both efforts. Its share price has slumped more than 80 percent this year.

Edward Yu, president research firm Analysys International, said the acquisition will give Sina an advantage of scale amid the global financial crisis.

He said China's online advertising business will not see a significant slowdown in the coming years as the online population will continue to grow.

It was also reported that Focus Media is taking with search engine Google Inc. about selling its online advertising business.

(China Daily December 23, 2008)